Appraisal Alphabet Soup

Image via Wikipedia

By: R. Matthew Reeves

 The recent economic downturn has proliferated the number of court proceedings in which the appraisal of real estate is a key component. Property tax appeals and foreclosure confirmations have joined the list of cases such as condemnations, property damage cases, divorces, estate cases, and business disputes in which real estate values are litigated on a frequent basis.  In one recent court proceeding, an appraiser referred to one appraisal professional organization as a “fraternity.” With the prevalence of appraisal testimony in court these days, it pays to know some of the secret handshakes. Among the alphabet soup and code words that comprise appraisal vernacular are the following:

 USPAP:  Uniform Standards of Professional Appraisal Practice. This set of industry standards and guidelines is published by The Appraisal Institute, and addresses many important steps in the appraisal process.

 MAI:  Member of Appraisal Institute, which is a certification earned by appraisers after many years of vetting and training by experienced peers.

 Comps: Comparable sales of real estate. In the sales comparison appraisal method, appraisers identify key aspects of the property being appraised and attempt to find comparable sales that are similar to the subject property.

 DCF:  Discounted cash flow. If it will take time for the property to be sold or rented, the appraiser may perform this kind of analysis, which estimates the present value of the property based upon a future sale or rental of the property.

Cap Rate:  Capitalization rate. This factor, which is calculated as part of some appraisals, is applied to the annual income stream of a rental property to appraise its value, under the income approach of appraisal. Cap rates are like golf scores; the lower the cap rate, the more valuable the property is.

 Co-Star:  A data service many appraisers use to search for comps.  This service researches and verifies information in real estate transactions. 

 GSCCCA: Georgia Superior Courts Clerks Cooperative Authority. This organization’s website contains deeds and other real estate records that appraisers use to search for and verify real estate data.

 GIS:  Geographical Information System. Many counties have a GIS system which provides a way to search for property information using an aerial database.

 GBA:  Gross building area. In the cost approach of appraisal, the square footage of buildings on the property is a key component of the appraisal.

 PSF: Per square foot. More valuable, and smaller, properties are valued per square foot.  Larger properties are valued per acre, which is 43,560 square feet.

 These and other appraisal terms have been analyzed at the appellate level in cases such as Resolution Trust Corp. v. Morrow Auto Center, 216 Ga.App. 226 (1996).

 If you have a matter which is likely to include testimony by an expert appraiser, it is essential to have counsel who can effectively cross-examine the appraiser and prevent the appraiser from delivering a damaging opinion by using unexplained and unchallenged premises, buzzwords, acronyms.

Do you want to use this blog article?

You may, as long as you include this complete bio with it:

 R. Matthew Reeves is a Georgia attorney, focusing his practice in civil litigation, particularly business, probate, and real estate law matters. 

 His firm, Andersen, Tate & Carr, P.C., works with all manner of clients in business and personal matters, providing “big firm” sophistication with suburban law firm attention and service.

Website: www.atclawfirm.com

Blog: www.andersentatecarr.wordpress.com

 Copyright © 2010, R. Matthew Reeves & Andersen, Tate & Carr, P.C.